(It is 4 weeks since David Carruthers’ arrest on July 16th, 2006. This week he was released under “house arrest” on million dollar bail.)
This is the week that was. A round-up of the best articles related to the David Carruthers/BETonSPORTS case in the international media and weblogs.
(As this is my first round-up, I will include some earlier articles from August.)
Newspapers and Magazines Online:
First, is US sheds few tears for Carruthers by Walter Olson, August 7th, 2006 in the UK Times:
…[The BETonSPORTS prosecution] rather calls to mind humorist Dave Barry’s comment on the legal action by American state governments against cigarette makers. “The underlying moral principle of these lawsuits was: ‘You are knowingly selling a product that kills tens of thousands of our citizens each year. We want a piece of that action!‘” In fact, federal law already imposes a special surtax on illegal wagering, whose practitioners are apparently expected to poke their heads above ground long enough to mail a check to tax authorities.
The various land-based casinos, state lotteries, Indian tribes, riverboats and racetracks that constitute America’s vast (and politically savvy) legalised gambling sector are likewise not exactly draining their tear ducts for Mr Carruthers. The press release from federal prosecutors pointedly noted that BetOnSports.com’ activities could “harm legitimate businesses” — that is to say, might offer consumers a preferred alternative to them. So both anti-gambling activists and their gambling-industry opponents have reason to be pleased. Quite a broad political coalition.
Next is the highly critical - of the prosecution and their political masters - editorial in the Wall Street Journal of August 8th, 2006 entitled ‘Arrested on a Bet’:
…By any measure, this is a case of extraordinary prosecutorial zeal. Mr. Carruthers is a British citizen, just laying over in the U.S. The legal theories under which he is being held and charged are untested, to put it politely. His business is perfectly legal in the U.K.
Mr. Carruthers and others, including BetOnSports.com itself, are charged with conspiring to run an illegal gambling operation under the 1961 Wire Act. Mr. Carruthers, who could face 20 years in prison if convicted, pleaded not guilty last Monday. The business that Mr. Carruthers ran is (or was) an online gambling site that allowed users to place wagers on sports events or play casino-style games for real money. Pursuant to a restraining order from a U.S. judge, the site is currently shut down.
But this was not a furtive or fly-by-night operation. A 2005 reform of gambling laws in Britain legalized online gambling in an attempt to regulate, control and tax it. On this newspaper’s Web site in April, Congressman Jim Leach (R., Iowa) engaged Mr. Carruthers in a debate on whether and how online gambling should be regulated in the U.S. Mr. Carruthers declared himself in favor of regulation to protect minors and potential gambling addicts. He added:
“While Rep. Leach maintains that online gambling is illegal in the U.S., the legal issues are not clear. Rep. Leach is relying on an outdated, irrelevant law [the 1961 Wire Act] that is inapplicable and unenforceable for online gambling. That is why we are looking for clear standards, regulations and licensing for what is an everyday entertainment medium enjoyed by millions.“
Mr. Carruthers may now get those standards the hard way. Mr. Leach, meanwhile, has promoted through the House a bill that would tighten restrictions on offshore gambling online and forbid U.S. financial firms from processing payments to offshore gambling sites (which many banks already decline to do voluntarily). Senator Jon Kyl (R., Arizona) has been trying, so far unsuccessfully, to push a similar bill through the Senate.
One irony is that Mr. Leach’s legislation would expressly carve out gambling that is run by government — such as lotteries and state-run gambling on horse races. Mr. Leach argues that these enterprises and private casinos are more easily regulated than Web-based businesses, which may be true. But it’s also true that they’d rather not have the online competition, which is why most of those “good” gambling operations support suppression of online gambling sites like BetOnSports.
No doubt there is potential for online gambling abuse. But BetOnSports and Mr. Carruthers are not charged with dishonest behavior toward their customers. They are being told that a business they believed was legal was a criminal enterprise even if it was being run in the open. That suggests that prosecutors believe they have the right to enforce compliance with even ambiguous U.S. laws on any business, wherever based, solely because some of the people accessing their site happen to be Americans. As a legal theory, this is a stretch. But as an excuse to incarcerate a foreign national just passing through, it smacks of a politically opportunistic prosecution.
In St Louis life: If internet gambling is ‘a scourge on society’, then why not casinos? by David Litterick, August 5th, 2006 in the UK Telegraph we get a little local colour:
…As David Carruthers was brought into courtroom 13 South of the Thomas F Eagleton courthouse in St Louis on fraud charges this week, a smartly suited man called Geoff Brammer sat at the back of the public gallery.
Brammer has no direct connection to the case but, as Britain’s Deputy Consul General in Chicago, it is his job to make sure Britons in custody abroad are well cared for and come to no harm. Brammer is fresh off the plane from London where three weeks ago he was given the job of crisis management - looking out for Brits caught up in the Lebanon conflict or the Asian tsunami.
…
“First in booze, first in shoes, and last in the American League,” the wags once said of the city [of St. Louis], in reference to its major industries and struggling baseball team. Anheuser-Busch, the brewer of Budweiser, still has its headquarters here, but the once bustling footwear and clothing companies are largely gone.
Once freed - something that should happen this week - Mr Carruthers can combine two of the three with a visit to Busch Stadium, where the St Louis Cardinals are again a force to be reckoned with. In his lighter moments, he may even appreciate the irony that if he walks a few blocks away from the court-house where he appeared, he will be free, once again, to gamble.
Despite US Attorney Catherine Hanaway’s crackdown on internet betting, the President Casino is still open for business. A boat afloat on the Mississippi, the President offers three decks of opportunity to lose your money on slot machines, roulette, blackjack or poker.
It’s not a classy place, resembling nothing better than the gaudiest of amusement arcades at Blackpool Pleasure Beach. It’s also supposedly strictly regulated, although you’d be hard pushed to notice. Punters can visit 22 hours every day and you don’t even have to make an effort to get there. The casino lays on free shuttle buses from the suburbs.
As a sop to the religious right, who hold increasing sway in the state (Hanaway was controversially appointed by President Bush after she ran his election campaign in Missouri) losses are limited - although only to $500 every two hours. You can still lose more in one week than the average American earns in a year.
As Anheuser retirees sit downstairs betting their retirement savings on Texas Hold ‘Em, and working-class, ethnic minority St Louisians pour their earnings into slot machines, it’s hard not to wonder - if internet gambling is, as some lawmakers put it, “a scourge on society”, why not this?
The answer, of course, is politics. It’s no coincidence that this latest push to crack down on gambling, coinciding as it does with a Bill now passing through Congress, comes during an election year where the Republicans are seriously at risk of losing the Senate to their Democratic rivals. And so David Carruthers and BetonSports are caught in limbo, although critics would contend it is one of their own making.
TS Eliot, who was born and raised in St Louis before adopting England as his home, asked: “Until you are in over your head, how can you tell how tall you are?”
Carruthers is not a small man, but his slouched appearance this week, in courtroom 13 South, suggested a man who realises he has only just started to enter the deep end.
On a similar subject, in An Interview With Lawrence G. Walters: Part I, by Karl Yu of Winneronline on August 15, the obvious question is asked:
…WO: Why in your opinion has the British government not raised more of a stink about the United States detaining one of their citizens, especially a CEO of a publicly traded company?
LGW: I guess you’d have to go back to them on why not? This is, I’m sure, a very sensitive matter between the U.S. and the U.K. I’m sure it’s been discussed at higher levels in a non-public forum. The results of those discussions are yet to be seen but certainly if I were involved in the British government I would have a significant problem with another country detaining one of my citizens for an activity which has been legalized in my host country and one which the country is going to license in the near future.
This should be something on which the U.K. is outspoken and incensed about but we’re not seeing that for whatever reason. There may be some backroom negotiations. The United States has taken a firm stance against online gambling, they’re attempting to expand their legislation and take on even more types of online gambling and so we are certainly at logger heads with the U.K. on their approach to online gambling, their legalization approach, and this is going to be a sore subject for year’s to come between the two countries as we try to sort out the differing cultural approaches to gambling, particularly online gambling, and this is going to be, in my prediction, one of several of these kinds of cases of an increasingly isolated U.S. policy of absolute prohibition that is going to get us into trouble as we confront other countries that take a more progressive view towards this popular activity in the United States.
Writing in Sports Illustrated, Justin Doom’s Bettors deserve better; Crusade against online sports gambling is unfair, August 15, 2006 tells it how it is:
Did you hear what happened to the folks over at BetOnSports.com? After recently being singled out and indicted by U.S. prosecutors, the Web site, which according to The New York Times took between 70 and 80 percent of its wagers from U.S. residents, announced last week that it will shut down most of its operations.
David Carruthers, the former CEO of BetOnSports, was arrested at the Dallas-Forth Worth airport last month during a layover. Carruthers’ company has been charged with, as the Times story noted, “running an illegal gambling operation.” The story continued: “United States prosecutors assert that offshore Internet casinos violate the Federal Wire Act of 1961. Legal experts, noting that the position is untested, say the law seems reasonably construed to cover sports betting but is less clearly applicable to casino games, like blackjack and poker. The House of Representatives recently passed legislation to strengthen the laws against operating Internet casinos but the Senate has not yet passed the legislation.” Prosecutors are seeking a $4.5 billion penalty against BetOnSports and its execs.
So now, instead of just keeping careful track of how much money I bet on sports, I’ll now have to track exactly how I do it, to say nothing of my meager online poker expenses. (By the way, as of June 7, playing online poker in the state of Washington is a felony. A felony!)
Carruthers remains in custody as I sit here in front of a keyboard, literally two or three clicks away from putting 20 bucks on the Bears (-3 at -125) at Green Bay in Week 1. If I lived in Las Vegas, things would be much easier. I wouldn’t have to worry about how to lay down my bet. A quick 10-minute drive to my local sportsbook and that would be that.
So many things about this case confuse me. Allegedly, online gaming sites are violating the Federal Wire Act. But why doesn’t the government just fess up about why it’s really cracking down on this type of behavior? It wants to get paid. BetOnSports, shares of which are publicly traded in Britain, went public in 2004 and raised more than $100 million. Last month, when trading stopped, the shares were worth $234 million. Because online poker sites and sports betting sites are set up offshore, or, in at least one case, in Canada, the U.S. government can’t tax them. And these businesses rake in billions. Uncle Sam wants his slice of the pie.
Oh, yeah, the “moral obligation” to prevent people from gambling. That’s right. I can gamble on stocks online — or live, or give thousands to a broker, or buy and sell houses in a volatile real-estate market — but not a sports team or pocket aces. I can walk into any casino in America, a number of which are on Native American land, and throw down some change. That’s fine. And while not every non-Vegas, non-Atlantic City casino is on Native American land, many of those that are receive tax breaks, to say nothing of the myriad tax breaks granted throughout history to corporations with offshore “offices.” Yet if I want to put 10 bucks on the Monday-night game, I’m some sort of criminal? I just don’t get it.
Sure, gambling can be tough on some people. It’s a vice. But instead of shutting down online gaming operations, here’s a better idea: Tax them and put the majority of that money into local Gamblers Anonymous programs. Do something good with it. Prohibition doesn’t work. Speaking of which, remember the last time you watched an NFL game and didn’t see a beer commercial? Me too: never. So, to recap: Drinking is great. Online gambling? Not so much.
Given the current state of the world, the wars, the threats of terrorism, to say nothing of domestic issues such as fixing Social Security or figuring out proper immigration reform, somehow Congress and its lapdog attorneys feel the best way to spend taxpayer money is to go after Web sites that provide a nice distraction from the drudgery of everyday life. Kind of funny if you think about it. Not “laugh out loud” funny, but more “something you’d read in a Kurt Vonnegut novel” funny.
In A Good Bet, Parmy Olson on 15 August, writes in Forbes:
For several rapturous years, hundreds of companies have been exploiting the fact that U.S. laws on online gambling are as hazy as your classic, smoke-filled casino. Even while the U.S. Department of Justice insists all forms of online gambling are illegal, based on the 1961 Federal Wire Act, that interpretation has not been accepted in some U.S. courts. And case law has given online gambling businesses cause to believe that non-sports Internet wagering is, in fact, legitimate. With no specific federal legislation on Internet gambling, this $12 billion industry has been able to garner half of its revenue from America.
The arrest of Carruthers, coupled with the passage of a bill in the U.S. House of Representatives that would ban the use of credit cards to pay for online gambling transactions, has sparked fear in the industry that a federal crackdown, and something reminiscent of the dot-com boom and bust, is imminent.
If you are the kind of investor who likes to gamble, this may not matter. “Even if prohibition comes into effect, I don’t think there’s anything the U.S. can do to these companies as long as you stay out of the country,” says professor Joseph Kelly of the State University of New York at Buffalo, one of America’s top consultants on the Internet gaming industry. “You can’t enforce it. People will just use electronic cash entities like NETeller.”
Washington state may offer an example of what could happen if the U.S. federally prohibits online gambling. “Gambling online in Washington is already a class C felony, which is the equivalent of being accused of sexual assault,” says Kelly. “Will they ever enforce this? No, because no jury is ever going to convict.” In the entire U.S., he adds, only one person has been prosecuted for gambling on the Internet.
Analysts seem to agree that the U.S. also won’t have the appetite to prosecute online gambling firms. “There has been a history of convictions for online gambling,” says Matthew Gerard, a leisure analyst at Investec. “But the common theme is that they all have been accused of doing something else, like money laundering, tax evasion or racketeering.” With one or two exceptions, the U.S. Department of Justice has not gone after companies solely for their gambling exploits.
Weblogs
(David G. Schwartz in Die is Cast on August 15th, mentions the Forbes article.)
Stephen Roman in NastyBrutishAndTall on August 8, 2006 comments on the Wall Street editorial and pithily analyzes the bad roots underlying the prosecution:
…This case is one that only a statist could love.
Illegal?
The Wire Act is frequently used as a stop-gap measure when existing legislation hasn’t caught up with reality but what Mr. Carruthers did was not illegal in the UK.
…
Protectionism
…
The lobbying to restrict gambling is pure protectionism masquerading as protection for the children. The argument that online gambling puts the young at risk is absurd given that nearly any other age restricted product can be purchased online. Is it really necessary to throw foreign CEO’s in jail to protect our casino industry?
Political Games
This Nifong style prosecution has nothing to do with morality and is a pure political move. Carruthers was a target because of his outspoken views on gambling and his arrest was a message to the other gaming CEO’s to keep their mouth shut. Since the Blair the lapdog cares not a whit about what happens to his businessmen it’s a message that won’t take long to sink in.
He then goes on to ask in a follow-up post on August 10, 2006 the next question that everyone should be asking:
Is the Justice Department going to steal BetOnSports US Client’s funds?
This article suggests it’s a possibility: http://www.nytimes.com/aponline/us/AP-Online-Gambling-Money.html
But [senior prosecuting US attorney] Hanaway said if BetOnSports doesn’t return the money, the U.S. government has every right to seize it.
Hanaway contends the bets were placed illegally, violating the 1961 federal Wire Act. That means the government could take the money to settle legal claims in the same way it takes money from drug cartels, Hanaway said.
‘’In all kinds of crimes we forfeit money that someone has paid,‘’ she said.
Finally, Paul McNamara writing August 16th in NetworkWorld:
Government anti-gambling hypocrisy at a glance
http://www.networkworld.com/community/?q=node/6603
We live in a country where the authorities don’t hesitate to spark a trade war by arresting a man for operating an online sports betting parlor, even though the establishment is located overseas in a country where such an enterprise is perfectly legal. At the same time, our federal and state lawmakers trip over one another to demonstrate their opposition to Internet gambling, egged on by conservative members of the morality police and paternalistic liberals (who could be counted on to rise in fury at a government intrusion into the home if the instruments of pleasure were kinky or combustible instead of a broadband connection, a credit card and a football game).
But, hey, I won’t begrudge any private individual his or her hobbyhorse — even those who would deny me my hobbies and my right to dispose of my disposable income on the outcome of tonight’s Red Sox game. It’s strictly the government hypocrisy that burns my backside like a daylong sit on a Dell laptop.
And if you want to take a gander at this hypocrisy in all of its shameless glory — hypocrisy at a glance, if you will — then check out this new map just added to MSNBC’s Web site. It’s a map of the United States (and ol’ what’s-its-name to the north) that is littered with dots that each represents a government-run gambling operation, otherwise known as state lotteries.
Let me tell you, I haven’t seen that many dots in one place since Mom took us kids over to a neighbor’s house for a visit with the express intent, I learned years later, of getting our chicken pox out of the way (or was it measles?).
The company providing the lottery info to MSNBC, rather ironically called Gaming Solutions International, issued a press release about the adoption of its technology. From that release:
“MSNBC.com will now be offering its audience a best-of-breed lottery results platform that users will be able to use and enjoy each and every day when visiting MSNBC.com. With over 200 current lottery games in the U.S. alone, and with 74% of U.S. adults playing the lottery regularly, our patent-pending suite of interactive lottery data services will provide MSNBC.com’s visitors with exceptional content they will interact with on a daily basis.”
You can even see which state’s lottery jackpots are growing the fastest. Right now it’s California’s SuperLotto Plus, so give Aunt Martha in Modesto a jingle so she’ll buy you a handful of California dreamin’.
As for you selectively anti-gambling lawmakers, you can kiss my Dell.
TAGS: David Carruthers
betonsports, Betonsports,
BETonSPORTS, BetOnSports, betonsports plc, Betonsports case
August 18th, 2006
Categories: Street of Shame . Author: FreeDavid . Comments: No Comments
